HC Deb 19 July 1979 vol 970 cc1972-4
8. Mr. David Price

asked the Chancellor of the Exchequer, in view of the strength of the £ sterling, what further steps he intends to take to reduce exchange controls.

Sir Geoffrey Howe

I refer my hon. Friend to the answer that I gave to my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) on 18 July.

Mr. Price

Following my right hon. and learned Friend's written answer yesterday, what is the extent of the remaining exchange control restrictions, and what economic or, indeed, national purpose do they serve?

Sir G. Howe

As my hon. Friend appreciates, we have made two substantial reductions in the scope of exchange control. The substantial part that remains concerns arrangements for the control of portfolio investment outside investments denominated in EEC currencies. The apparatus of which they represent a part has been with us for about 40 years, and we are proceeding to its progressive dismantlement at which I judge to be the right pace in the circumstances.

Mr. Healey

Will the right hon. and learned Gentleman comment on a point in the original question, namely, the implication that the relaxation of exchange control that he has just announced will reduce the strength of the £ sterling? How does he reconcile such a view, if he holds it, with what his right hon. Friend the Financial Secretary said a moment ago, that there was nothing that the Government could do that would influence the sterling exchange rate?

Sir G. Howe

As the right hon. Gentleman appreciates, the sterling exchange rate is substantially set by market judgments. The case for reduction in exchange control stands in its own right and is justified for that purpose. The fact that sterling now stands high provides circumstances in which it becomes possible to make those changes.

Mr. Higgins

If the Chancellor is anxious to reduce unnecessary bureaucracy and waste of resources, will he say whether it will still be necessary for travel agents and others issuing foreign currency to individuals to mark their passports? Secondly, is it still proposed that those buying shares in Europe will have to leave them with a recognised depository?

Sir G. Howe

At present, the basic arrangements for applications under the existing exchange control regime remain in force. I shall have to look at the detailed points raised by my hon. Friend, but it would be our intention to proceed towards the removal of unnecessary administrative obstacles as quickly as possible.

Mr. Robert Sheldon

Why is the Chancellor so pleased with the high level of sterling, bearing in mind the statements by prominent industrialists about the harm that it is doing to manufacturing industry? In view of the right hon. and learned Gentleman's addiction to market economics, does he agree that the higher the cost of our exports the fewer we sell, and that the cheaper the cost of our imports the more we buy, to the detriment of our manufacturing industry? Why does he not instruct the Bank of England to intervene sensibly in the market?

Sir G. Howe

The movement of the exchange value of the £ sterling has effects on both factors to which the right hon. Gentleman referred, but experience under successive Governments has shown that attempts to predetermine or determine the proper exchange value for the pound sterling are difficult to achieve, even if it is right to try to do so.